NU ONLINE NEWS SERVICE, APRIL 30, 12:21 P.M. EDT
Pricing for directors and officers insurance dropped 12 percent in the first three months of 2012 compared to 2011's fourth quarter, according to an Aon Financial Services Group report.
In the report, Aon tracks D&O rates through its pricing index, which uses 2001rates as a baseline score of 1. Rates soared above the baseline in 2002 and 2003 before falling from 2004 to 2010. In 2011's first quarter, rates fell below the 2001 baseline, and have remained there since.
From 2011's fourth quarter to 2012's first quarter, rates fell from 0.91 to 0.80.
Aon notes that in addition to premium reductions, the index is affected by clients buying higher limits or converting traditional ABC limits to Side A only limits, both of which would reduce the overall average rate per million during the quarter.
Aon says that while fluctuations in coverage limits are not unusual on a month to month basis, a more meaningful measure derived from this index is that pricing also decreased 7 percent in the first quarter of 2012 compared to the first quarter of 2011.
Since D&O policies are typically written for a 12-month period, this year-over-year comparison is a close approximation of renewal pricing and a more significant indicator of renewal results in the quarter, the report says.
The report is compiled using the proprietary policy data of Aon's Financial Services Group that currently comprises the policy information of over 7,350 D&O programs for publicly traded companies between Jan. 1, 2001 and March 31, 2012.
The majority of the companies in the report are U.S. issuers traded on U.S. exchanges and represent the U.S. D&O market and not the global market, Aon says.
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